Leveraging Data to Drive Operational & Procurement Decisions in Transportation

Thanks to ongoing innovation in technology, systems integration, and cloud networks, we have more data available today than ever before. This is particularly true in our transportation networks. But how can companies turn this abundance of data into actionable insights to make smarter and more effective operational and procurement decisions? That is the key question I discussed with Tim Dalton, Director of Professional Services, and Alan Pyrett, QA Manager, Managed Analytical Services, at BluJay Solutions, during a recent episode of Talking Logistics.

The Basics: Collecting the Data

I began our discussion by asking Alan what transportation data companies should be interested in and how they should collect it. Alan points out that deciding what data to collect requires you to understand what type of transportation decisions you’re trying to make. He cites the example of temporarily shutting down a plant and moving production to another facility. Do you have the transportation resources to handle that pivot? If not, do you need to conduct a short-term bid? What’s happening with spot market rates versus your contract rates? “It really comes down to understanding your transportation network today,” says Alan, including factors such seasonality, mix of equipment types and modes, origin and destination points, and other shipment-level data.

“As far as collecting the data, if you have a good TMS partner, it’s really easy,” Alan continues. “For example, we capture data at all the major milestones and you can use that data in powerful ways to understand everything that is occurring in your order-to-cash cycle. And understanding where your capabilities stand in relation to the market is increasingly important.”

Using Data to Improve Day-to-Day Operations

So, once you’ve collected the right data, how do you use it to improve your day-to-day operations? Alan says, “Data metrics are critical. If you can’t measure it, then you can’t manage it. First, you have to make sure you’re measuring all of the aspects of your business that are key to your strategy, and watch as those metrics change over time. And then we have to communicate those metrics up and down the supply chain so all stakeholders know what metrics we’re following.”

Tim notes that we have gotten much better at drilling down into the data to determine the root causes of problems. He gives the example of using carrier scorecards to understand carrier performance. The scorecard may indicate a carrier has fallen below acceptable levels on tender acceptance. But drilling down into the data may show that your shipment volume in his lane has doubled and the carrier is actually doing well by covering 50% more loads than originally agreed upon. It’s all about understanding the story behind the numbers.

How Data is Impacting Procurement Strategy

How is all of the data we’re now able to collect impacting procurement strategies? Tim comments that some shippers have been hesitant to conduct a procurement engagement since the pandemic hit because it is tantamount to asking for a rate increase. But with the capacity issues they are facing and the steep increase in the use of the spot market, which can cost up to 40% more, securing capacity with updated contract rates isn’t such a bad idea.

“Data has always been important for procurement,” says Tim. “You collect all of your historical data on lanes and make assumptions about volumes and put them out to bid. What’s changed is looking at your strategies before you go to bid. For example, do you need to go to market with all of your lanes? If you have lanes that are working, it may be better to work with your existing carriers to extend their rates and commitments and build that partnership instead of tearing up your network every year.

“Shippers are also providing more data and information to carriers so they can better understand the lanes they are bidding on,” continues Tim. “This makes the carriers aware of the peaks and valleys during the year, or even during the week, so they can better plan to respond to your needs. We’re not necessarily there yet as far as what data we should give to carriers, but we continue to get better. Even if the result of supplying this data reduces the savings upfront, it can significantly reduce the risk of carriers coming back after the fact saying ‘I need more money’ or ‘This lane doesn’t work for me’.”

Improving Operations After Procurement

When I asked Tim how companies can use the data after the procurement event is over to improve their operations, Tim turned it around to say the procurement process is never really over. Changes occur throughout the year and you have to use the data to analyze the business and market changes, and work with your carriers to find solutions. “I can’t stress enough the importance of having the proper operational metrics in place, along with having the ability to benchmark yourself against the market, so you can react quicker to when things start to fall apart and put a solution in place before it has a big financial impact,” says Tim. “Once the bidding process is complete, it’s all about managing the process and making sure everyone is living up to their commitments, including your own. Then have a process in place when things go wrong so that you know how you’re going to address it.”

Your Progress vs. The Market

Once you’ve put your data collection processes and analysis in place, how do you know how you compare against the rest of the market? And what distinguishes the leaders from the laggards? Tim and Alan shared some great insights and advice on those questions and more, so I recommend that you watch the full episode for all the details. Then post a comment and share your own thoughts and questions on this topic.